We actually checked their credit report last week and there's nothing on it about tax liens. Does that mean the debt might be too old to collect? They haven't had any credit cards or loans during this period either, so the report is basically empty.

That's actually a potentially good sign. The IRS stopped putting tax liens on credit reports for the most part after 2018, but if this debt was active and being pursued aggressively before then, you might have expected to see something. The empty credit report aligns with their "off the grid" lifestyle, which ironically might have worked in their favor regarding the statute of limitations. However, this is still not conclusive evidence - they need to get their tax transcripts to know for certain what debts might still be collectible.

This isn't entirely accurate. If they haven't filed returns for those years, they won't meet the "return filed at least 2 years ago" requirement. The IRS also sometimes files "Substitute for Returns" which don't count as taxpayer-filed returns for bankruptcy purposes. They would need to file proper returns first.

You're absolutely right about the return filing requirement - I should have been more clear. If your friend hasn't filed returns for those tax years, they would need to file them first and then wait two years before the taxes would be eligible for discharge in bankruptcy. The Substitute for Return point is also important. If the IRS filed these on your friend's behalf, they don't count toward making the tax dischargeable - your friend would need to file their own returns to replace these.

$220 for a simple return?? That seems really expensive. Was that including state filing too?

Yes, that included both federal and state filing fees. You're right that it's not cheap - and honestly that's why I'm not going back this year. The $50 gift card was nice but when I looked at the total cost, I realized I could have done it myself for much less. I'm using one of the self-prep software options this year since my tax situation hasn't changed much. The "bonus" isn't worth the extra fees when you do the math.

Is that the same as the free version that TurboTax advertises? I tried that last year but they kept trying to upsell me and eventually said I needed to pay because of my student loan interest form.

Do you use a specific spreadsheet template for tracking? I'm wondering if I should just give up on software entirely and track everything manually from the start.

I created my own spreadsheet that specifically labels transaction types (buy, sell, short open, short close, staking reward, etc.) and calculates gains according to the actual tax rules. It was time-consuming to set up initially, but saves me headaches during tax season. I don't recommend giving up on software entirely though. I use it as a starting point and to catch transactions I might have missed, then reconcile with my own records and make manual adjustments where needed. The software is also helpful for generating the final tax forms.

Be careful with that approach. Unless you've made a formal mark-to-market election that covers your crypto trading (which is questionable since crypto isn't technically a security), you're supposed to track each transaction individually. The IRS has been increasingly focused on crypto compliance, and using an unauthorized accounting method could create problems if you're audited. They've specifically stated that cryptocurrency should be treated as property, subject to capital gains rules with specific lot identification.

Because the IRS doesn't know whether your distribution is contributions, conversions, or earnings without you telling them. That's what Form 8606 does - it helps you calculate and show which part of your distribution is taxable. Without it, they'd have to assume the worst (that it's all earnings).

What kinds of things could be missed on a home sale? I thought it was pretty simple - if you lived there 2 of 5 years you get the exemption up to $250k/$500k depending on if you're single or married?

The basic exemption rule is straightforward, but there are several areas where people commonly miss opportunities or make mistakes. Home improvements can be added to your basis (original purchase price + improvements), which reduces your capital gain. Many people don't keep good records of these or don't know which improvements qualify. This includes major renovations, additions, new roof, HVAC systems, etc. - not regular repairs or maintenance. If you ever used part of your home for business or rental purposes, the calculation gets more complex since that portion may not qualify for the full exemption. This requires proper allocation and depreciation recapture considerations.

Second FreeTaxUSA! Used it for the last 3 years and it's just as good as TurboTax for way less. I had a home sale last year too and it walked me through it fine. Saved like $120 compared to TT.